What Delaware Franchise Tax Is and Who Pays It

Delaware franchise tax is an annual fee that corporations, limited liability companies (LLCs), and other business entities incorporated in Delaware must pay to the state. It is not an income tax — it is a tax on the right to do business as a Delaware entity. Even if your company operates entirely outside Delaware, if you are incorporated there, you owe it.

The amount you owe depends on your business structure and, in most cases, your gross revenue. Corporations and LLCs pay based on a sliding scale tied to annual gross receipts. Other entity types — such as limited partnerships, statutory trusts, and business trusts — pay a flat fee. The Delaware Division of Corporations sets the rates and collects the payments.

The tax is due by March 1 each year for the previous calendar year. If you miss the deadline, the state charges penalties and may revoke your certificate of good standing, which can affect your ability to conduct business, open bank accounts, or renew licenses in other states.

Key Takeaways

  • Delaware franchise tax is due March 1 each year and is based on your entity type and gross revenue, not on profit or income.
  • You can pay online through the Delaware Division of Corporations website, by mail, or in person at their Dover office.
  • Late payments trigger penalties starting at $125 and can result in loss of your certificate of good standing.
  • If you incorporate mid-year or dissolve your company, you may owe a prorated amount or a final payment depending on when the change occurs.
  • Many registered agents and business formation services offer to handle franchise tax payments on your behalf for a fee.

How to Calculate What You Owe

The amount depends on your entity type. Corporations and LLCs use a gross receipts table: the more revenue your company reports, the higher the tax. The state publishes this table annually, and rates typically range from $75 for companies with less than $20,000 in gross receipts to $250,000 or more for companies exceeding certain revenue thresholds. You report your prior year's gross receipts on your tax return.

Limited partnerships, limited liability partnerships, and statutory trusts pay a flat annual fee, which is currently $300. General partnerships and sole proprietorships do not owe Delaware franchise tax if they are not incorporated in Delaware.

If you are unsure of your entity type or the correct rate, the Delaware Division of Corporations website includes a rate calculator and detailed instructions. You can also call their office at (302) 739-3073 to confirm your obligation before paying.

Online Payment Through the Delaware Division of Corporations

The fastest and most common way to pay is through the state's online portal. Go to the Delaware Division of Corporations website, locate the franchise tax payment section, and enter your entity name and identification number. The system will display the amount owed based on your prior year's filing.

You can pay by credit card, debit card, or electronic check. Credit and debit card payments process immediately and generate a confirmation number on screen. Electronic check payments may take one to two business days to clear. The state charges a small processing fee for credit and debit card transactions, but not for electronic checks.

Print or save your confirmation number. The state uses it to track your payment and update your certificate of good standing. If you pay online before March 1, your entity remains in good standing automatically.

Mailing a Check or Money Order

If you prefer to pay by mail, send a check or money order to the Delaware Division of Corporations at 401 Federal Street, Suite 4, Dover, DE 19901. Include a cover letter with your entity name, entity identification number, and the tax year you are paying for.

Mail payments must arrive by March 1 to avoid penalties. Because mail delivery times vary, the state recommends mailing at least one week early. If you use certified mail, keep the receipt as proof of timely mailing in case the state later questions when payment arrived.

Processing takes five to seven business days after the state receives your payment. During that time, your certificate of good standing may show as expired. Once the payment is recorded, the certificate updates automatically.

In-Person Payment at the Dover Office

You can pay in person at the Delaware Division of Corporations office, 401 Federal Street, Suite 4, Dover, DE 19901. The office is open Monday through Friday, 8:00 a.m. to 4:30 p.m. Eastern Time, except state holidays. Payment by check, money order, or cash is accepted.

Bring your entity identification number and prior year's gross receipts documentation if you are unsure of the amount owed. A staff member can confirm the correct tax and process your payment on the spot. You will receive a receipt immediately.

In-person payment is useful if you need your certificate of good standing updated the same day or if you want to ask questions about your tax obligation before paying.

What Happens If You Miss the March 1 Deadline

If your payment does not arrive by March 1, the state assesses a penalty of $125 plus interest. The interest accrues monthly at a rate set by Delaware law. Your certificate of good standing is automatically revoked, which means your entity is no longer in good legal standing with the state.

A revoked certificate can create serious problems: banks may freeze or close your business accounts, you may lose the ability to sign contracts or sue in Delaware courts, and other states may refuse to renew your business licenses or registrations. Some states will not allow you to register as a foreign entity if your Delaware certificate is revoked.

If you are late, pay as soon as possible. The state will reinstate your certificate once payment and penalties are received. There is no grace period, but paying within a few days of the deadline is far better than waiting months. If you cannot pay by March 1, contact the Division of Corporations to discuss your options — they do not offer formal payment plans, but they can explain the consequences and help you understand what to do next.

Using a Registered Agent or Service Provider

Many businesses hire a registered agent or business formation service to handle franchise tax payments on their behalf. These providers maintain a Delaware address for your company and often include franchise tax payment as part of their service package. They track the deadline, calculate the amount owed, and submit payment before March 1.

If you use a registered agent or service, confirm in writing that they will handle franchise tax payments and ask them to notify you when payment has been submitted. Some providers charge a flat annual fee that includes the tax payment; others charge separately. Read your service agreement carefully to understand what is covered.

Even if someone else handles the payment, you remain responsible for ensuring it is made on time. If a service provider fails to pay and your certificate is revoked, you will still owe the penalties and face the consequences.

Frequently Asked Questions

What if I incorporated in Delaware mid-year?

You owe a prorated franchise tax for the year you incorporate, calculated based on the number of months remaining in the calendar year. The state's online system will show the prorated amount when you enter your incorporation date. You pay this prorated amount by March 1 of the following year, along with your full annual tax for that year.

Do I owe franchise tax if my Delaware company is inactive?

Yes. The tax is due every year as long as your entity is incorporated in Delaware, regardless of whether you are actively doing business. If you no longer need the company, you must formally dissolve it with the state to stop owing the annual tax. Dissolution requires filing paperwork and paying a dissolution fee.

Can I pay franchise tax for multiple years at once?

You can pay back taxes owed from prior years, but each year's payment must be calculated separately using that year's gross receipts and the tax rate in effect for that year. Contact the Division of Corporations to confirm the amounts owed for each year before submitting payment.

What if I do not know my entity identification number?

Call the Delaware Division of Corporations at (302) 739-3073 or visit their website to search for your entity by name. They will provide your identification number, which you will need to pay online or to include in a mailed payment.

Is there a way to avoid the late penalty if I pay after March 1?

No. Delaware law does not provide a waiver or grace period for franchise tax. The $125 penalty applies automatically if payment arrives after March 1. The only exception is if the state's office is closed due to an emergency — in that case, the deadline may be extended by official notice.